The Co-operative Group is to cut its near-£1m annual donation to the Labour Party as a result of the problems at its banking arm.

Lord Myners confirmed that his review of the mutual’s corporate governance will lead to a reduction in the funding the mutual gives to the party each year.

Speaking to The Telegraph, the former City minister said that as a result of the turbulent time at the Co-op, all third-party donations were in jeopardy.

“The scale of giving to others cannot go unaffected by the change in the Co-op’s economics,” said Lord Myners. “It’s got less money to spend on everything.”

“As a member-owned organisation, do you spend what money you have on pricing, on the dividend, on the retail estate, or on charitable giving? The new reality requires a question of priorities,” he went on.

His review will look first at the Co-op board and the way the mutual is run, and then at the organisation’s relationship with its near-8m members.

His work on the relationship with the Labour Party and other affiliated organisations such as other mutuals will form part of the second stage of the review, expected by the end of the year.

Lord Myners said that although cuts were needed, following the discovery of the £1.5bn capital black hole at the Co-op Bank it was also important to do what members wanted.

“I suppose the answer is the right thing to do is what the members want.”

He said currently members’ wishes were intermediated by committees and boards, but that “in the digital age it is possible to have connectivity with the membership in a more direct way”.

The governance review is likely to lead to an overhaul of the mutual’s 20-man board, and the appointment of an external chairman for the first time.

Asked if he wanted to be chairman, Lord Myners said he did not.

“I want to produce something that helps the Co-op. I’m a Lefty, it’s important to me,” said Lord Myners, who was appointed City minister in October 2008 by Gordon Brown.

“My ambitions don’t go beyond that,” he said.

His comments come ahead of another major week for the Co-op Group, when Lord Levene and Gary Hoffman are due to appear before the Treasury select committee on Tuesday.

The two men ran NBNK, one of two bidders for Lloyds Banking Group’s TSB branch. The other bidder, Co-op Bank, was selected as the preferred suitor, but the deal collapsed last April, six weeks before the capital shortfall was uncovered.

Lord Levene is expected to give more detail on the bidding process and what, he has argued, was undue political pressure on Lloyds to sell the TSB unit to the Co-op.

He has in the past described the process as a “wild goose chase” and is set to disclose further details of the political “interference” he has previously referred to.